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A federal court judge in California ruled in favor of an employer, granting a motion to dismiss a suit challenging the forms used to conduct background checks on potential employees. A pair of former employees sued, arguing that the employer did not satisfy the requirements of either the federal Fair Credit Reporting Act (FCRA) or the state counterparts by providing an application form along with a consent and disclosure form permitting the company to perform a review of the applicants’ credit histories. The judge, however, threw out the claims, although with leave to amend the complaint. “The court is not aware of any authority supporting this contention that merely presenting these documents together violates the FCRA,” the court said. Background check procedures remain a popular source of litigation from both employees and regulators (such as the Equal Employment Opportunity Commission, which has brought multiple lawsuits challenging the use of background checks), and employers should ensure that they are following both state and federal requirements when conducting preemployment background checks of applicants.

Detailed discussion

During the hiring process, Kohl’s Department Stores provided two forms to applicants. One document was an “Employment Application” and the second was titled “Consent and Disclosure for Acquisition of Consumer Report(s).”

The Employment Application consisted of two pages seeking identifying information on the first page, as well as information pertaining to availability, employment history, and the position sought. The second page requested that the applicant disclose his or her criminal history, with a statement above the signature line that released Kohl’s from liability associated with the preemployment check.

The one-page Consent and Disclosure Form requested the applicant’s identifying information and disclosed that Kohl’s would use a consumer reporting agency to obtain consumer reports on the applicant that would contain personal information such as criminal history, drug offenses and sex offender status. The form also provided the name and contact information for the consumer reporting agency, the method by which the applicant could dispute the report, and that Kohl’s might use the information gathered to make a hiring decision. Applicants were required to sign the form at the bottom.

Kohl’s filed a motion to dismiss the suit. The U.S. District Court for the Northern District of California granted the motion, although it dismissed the FCRA and ICRAA claims with leave to amend.

Section 1681b(b)(2)(A)(i) of the FCRA requires that “a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes.”

The plaintiffs advanced a theory that Kohl’s violated the stand-alone requirement because the Employment Application and Consent and Disclosure Form were part of the same employment packet and provided to applicants at the same time. They also alleged that the disclosure also failed the “clear and conspicuous” requirement because it appeared together with other information in the Employment Application.

Kohl’s countered that the documents were two separate forms that served two separate functions in the applicant screening process. The court agreed.

“Plaintiffs have not sufficiently alleged Kohl’s failure to comply with the statute,” the judge wrote. “Each form separately bears [the Plaintiffs’] signature. The Employment Application is formatted in landscape, bears a separate title, and contains a separate form code. More importantly, the Employment Application appears to serve a different and distinct function. It requests certain employment-related information about the applicant such as basic identifying information, criminal history, and authorization and release for the company to ‘contact … employment references and personal references, as well as education institutions.’ In contrast, the Consent and Disclosure Form is formatted in portrait, and bears a distinct title and form code.”

Based on the pleadings, “Kohl’s appears to have provided two separate documents to Plaintiffs, in compliance with the FCRA,” the court said.

The judge distinguished two cases cited by the plaintiffs where federal courts found possible FCRA liability when employers presented a release of liability with either a disclosure or authorization provision in the same document. “Here, in contrast, the disclosure and authorization provisions appear in one document (the Consent and Disclosure Form) while a release of liability appears in a separate document (the Employment Application),” the court explained.

The court granted Kohl’s motion to dismiss with leave to amend the FCRA and ICRAA claims. The plaintiffs conceded that the CCRAA claim was subject to dismissal and it was dismissed with prejudice.

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